U.K. mortgage approvals at 6-year high

JasonDouglas

LONDON--Britain's housing market is continuing to gain momentum after the number of mortgages approved in January rose to its highest monthly total in more than six years, but lending to businesses continued to fall.

Bank of England data Monday showed there were 76,947 new home loans approved in January, up from 72,798 a month earlier and the highest monthly total since November 2007.

Overall lending to consumers, net of repayments, rose by 2.1 billion pounds ($3.5 billion) in January, of which GBP1.4 billion was mortgage borrowing.

The revival in Britain's housing market has pushed up prices, prompting fears the economy could experience a potentially damaging real-estate bubble. BOE officials have played down the risk but say they are monitoring the market closely and have a range of tools they can use to rein in risky lending and ensure banks can absorb any losses.

The pickup in lending has yet to spread to Britain's businesses, BOE data showed. That may dampen prospects for a revival in investment, which BOE officials say is crucial if the U.K.'s economic recovery is to prove durable. Net lending to nonfinancial businesses shrank by GBP623 million in January; lending to small and midsize firms declined by GBP261 million.

The BOE is hoping changes to its funding-for-lending program will funnel more loans to firms and support hiring and investment. The program provides banks with cheap central bank funding provided they use it to make more loans. The BOE has cut support for mortgage lending through the scheme and refocused it on small-business lending.

The central bank said Monday 34 banks have signed up to the new program, and around GBP32.7 billion of funding will be made available at first to finance new loans.

Write to Jason Douglas at jason.douglas@wsj.com and Alex Brittain at alex.brittain@wsj.com

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